Club Med owner Fosun Tourism courts investors on return to profitability days after reports of debt concerns at parent firm

Club Med owner Fosun Tourism courts investors on return to profitability days after reports of debt concerns at parent firm

Club Med owner Fosun Tourism courts investors on return to profitability days after reports of debt concerns at parent firm

Fosun Tourism Group, the leisure and tourism unit of Chinese conglomerate Fosun International, is courting both domestic and international investors in a move that is in line with its asset-light strategy.

Investors who “share the same values and agree upon the company’s strategy” are welcome to acquire stakes in all units, Xu Xiaoliang, Fosun Tourism’s chairman, said during a media briefing on Friday.

Fosun Tourism, which owns popular resort chain operator Club Med, reported a net profit of 307.2 million yuan (US$42.69 million) for 2023, turning around from a net loss of 544.9 million yuan in the previous year. Its revenue jumped 24 per cent year on year to 17.15 billion yuan.

“We are taking an open and active attitude towards strategic investment,” said Xu, who is also co-CEO of Fosun International. “Any project and subsidiary can be invested in, as we open the door to all investors.”

Xu’s comments came after Reuters reported earlier this month that parent firm Fosun International was considering selling a stake in its luxury Atlantis Sanya resort in China’s island province of Hainan.

S&P Global lifted Fosun International’s rating outlook to stable and said in a report last May that the company could reduce its debt burden through asset sales and support from domestic banks.

Xu Xiaoliang, Fosun Tourism’s chairman. Photo: Handout
Xu would not say on Friday if the introduction of strategic investors to Fosun Tourism was aimed at helping its parent firm cope with debt. Fosun International, which is controlled by Chinese tycoon Guo Guangchang, had debts worth 220.9 billion yuan as of the end of June last year.

An asset-light strategy refers to a business model under which a company has only a small amount of fixed assets on its balance sheet.

“By selling down its stakes in subsidiaries, the company reduces its ownership in assets to lower business risks,” said Ivan Li, a fund manager at Loyal Wealth Management in Shanghai. “An asset-light strategy means Fosun Tourism wants to strengthen its roles as a service provider, or a reputable manager of hotels and resorts.”

01:13

Bridge in China swamped with tourists during Lunar New Year holiday

Bridge in China swamped with tourists during Lunar New Year holiday

Fosun Tourism will focus on improving its management capabilities to pursue higher profitability, Xu said on Friday.

Tourism has emerged as one of the top beneficiaries of China’s reopening after the Covid-19 pandemic. Hotels in China have benefited from a pickup in travel during Labour Day holidays in May and National Day holidays in October, with a huge surge in post-pandemic demand allowing them to raise their room prices aggressively, with some commanding a more than tenfold increase.

With a total floor area of 540,000 square metres, Atlantis Sanya has 1,314 hotel rooms and offers entertainment facilities that include aquariums, restaurants and shopping malls.

02:17

Thousands of tourists flock to China’s Great Wall during ‘golden week’, as travel numbers rebound

Thousands of tourists flock to China’s Great Wall during ‘golden week’, as travel numbers rebound

Fosun said in 2018 that its total investment in Atlantis Sanya amounted to 11 billion yuan. The resort generated 1.68 billion yuan in revenue last year, a 91 per cent year-on-year increase, with its occupancy ratio rising to 82 per cent from 43 per cent a year earlier.

Fosun International, whose businesses include tourism, real estate and financial services, said in its interim report that its “happiness” segment – consumer brands, tourism and leisure – generated more than 44 per cent of the group’s total revenue of 97 billion yuan between January and June last year.

“Travel demand remains high among high wage earners in China,” said Zheng Honggang, CEO of Shanghai-based Kate Travel Agency. “Fosun Tourism’s hotel and resort assets will be good buys because they can generate stable, long-term returns.”

Source link